§ Turning now to the capital account, we must dearly maintain in effect the measures we have taken to minimise the burden of outward investment on our balance of payments. The purpose of these measures has been not to bring overseas investment to a halt, but rather to make the overseas investment which continues more selective and in the process to reduce to a minimum the burden which it places on our reserves. Thus, we have made it a point of policy to secure that as much direct investment overseas as possible is financed by borrowing abroad. The result of our measures and of substantial inward investment has been that last year there was a surplus on our private long-term capital account.
§ On 30th January I announced a small change in Exchange Control rules for direct investment outside the Sterling Area, whereby exporters are now allowed to buy foreign exchange within limits at the official rate for export-promoting projects expected to bring benefits to the United Kingdom balance of payments provided that within eighteen months these benefits will equal or exceed the total cost of the investment and continue thereafter. This was a limited change for the specific purpose of promoting export sales; we are not yet in a position where there can be any more general relaxation of our controls over overseas investment, whether direct or portfolio.
Nor has the time yet come to relax the Voluntary Programme, which restricts direct investment financed from the United Kingdom in Australia, New Zealand, South Africa and the Irish Republic, and sets a limit to portfolio investment in these countries and outside the Sterling Area by United Kingdom institutions. This programme must continue for a further year, on the same basis as hitherto. This will be a disappointment to some, specially those firms which have already postponed projects in order to conform with the programme. But I am clear that it is necessary in the national interest, and that it should continue on the volun 258 tary basis which has served so well so far. I believe that I can count in industry's continuing co-operation in this. The Governments of the other countries concerned have been informed of the decision to continue the Voluntary Programme. I record my appreciation of their understanding attitude.
I want also to say something about private portfolio holdings of foreign securities. Since 1965 it has been the policy to transfer to the first-line reserves a proportion of these national overseas assets. This was done by the "25 per cent. scheme", under which a quarter of the foreign currency proceeds of any sale of foreign securities has to be exchanged into sterling at the official rate and is thus brought into the official reserves. This scheme has its disadvantages, and places some inhibition on the active management of portfolios. But in present circumstances we clearly cannot contemplate giving up this useful source of benefit to the reserves, though I should be glad to consider any sensible modification which would diminish this disadvantage, without at the same time diminishing the inflow of foreign currency to the reserves.